Enterprise Agreements – What are they and what are the benefits?
Introduction – What are Enterprise Agreements?
Where modern awards provide base employment standards for whole industries or occupations, enterprise agreements are tailored agreements that meet the needs of a particular enterprise. These collective agreements are made between employers and employees and usually address the terms and conditions of employment for all. Enterprise agreements can be made between one or more employers and two or more employees with their chosen representatives. They will usually address a broad range of matters, including employment conditions, rates of pay and dispute resolution procedures. These agreements cannot include unlawful content, like discriminatory or objectionable terms.
Background – Why Bargaining can be Controversial
Collective Bargaining has been a feature of the employment relationship since the industrial revolution. It has also been a political battleground throughout the western world: the political right, led by industry, have argued for deregulation, providing greater freedoms for employers to bargain directly with their workforce; the political left, led by unions, have fought to maintain and improve a safety net of standards for their workers. Like all ‘bargaining’ contexts, the incentive to participate in bargaining for all parties has always been provided by the prospect of improving their position.
In Australia, the debate reached fever pitch in 2005 with the Coalition’s Work Choices reforms, leading to one of the biggest and most important High Court decisions in modern times. The Federal Government successfully wrestled control of the bulk of industrial relations law away from the states, in order to provide employers with a virtually unfettered freedom to bargain directly with individual employees. For the Howard government, this was a legal triumph but a political disaster, contributing to their landslide loss at the 2007 election.
The ALP’s subsequent enactment, the Fair Work Act 2009 (Cth), restored significant regulation to agreement making. The Act included the National Employment Standards, reintroducing a meaningful statutory ‘safety net’ for national system employment. These standards cannot be contracted out of, or bargained away, by employers. Enterprise Bargaining Agreements (EBAs), as well as Individual Flexibility Agreements (IFAs) are now also subject to the ‘Better Off Overall Test’ (‘BOOT’). An EBA will not be approved by the Fair Work Commission unless they are satisfied that the employees are better off overall under the agreement, than they would be under the relevant modern award.
However, this has led to many employers questioning whether there are any remaining benefits to the Enterprise Bargaining Process. If employers are stuck with the National Employment Standards, and if every agreement results in employees being better off, does this mean that an agreement is required to make the employer worse off? Where is the ‘bargain’ in this? What is the incentive for employers to participate?
Under the Fair Work Act, a more creative approach to bargaining is now required, but with a proactive and careful approach it is still possible for enterprise agreements to be hugely beneficial.